Yen heads for weekly loss as intervention momentum from Japanese authorities fade

Yen fell in Asian trade on Friday against a basket of major rivals, resuming losses against the dollar after a short hiatus and heading for a weekly loss as intervention momentum from Japanese authorities faded. 

The losses came even as Japanese authorities issued a new series of warnings about the weakness of the local currency and irregular movements. 

However, markets are now focused once again on the fundamentals and the stark interest rate differences between the US and Japan. 

The Price

The USD/JPY rose 0.25% today to 155.77 yen, with a session-low at 155.26, after rising 0.1% on Thursday, the first profit in four days off one-week lows at 155.95 yen. 

The yen was also temporarily boosted yesterday by the dollar's decline after weak US unemployment claims data.

 Weekly Trading 

Yen is down 1.9% against the dollar this week, on track for the fifth straight weekly loss in a month and a half. 

Japanese Authorities 

Bank of Japan Governor Kazuo Ueda said the BOJ will monitor the impact of yen’s movements on inflation closely.

Japan’s finance minister Shinuchi Suzuki reiterated his warnings that authorities are prepared to intervene and stem volatile movements in the forex market. 

Traders believe that Japanese authorities intervened for at least two days last week to boost the yen after trading below 160 yen per dollar.

The Wall Street Journal reported the government’s intervention spanning Monday and Wednesday, with a focus on low-liquidity days to maximize effects.

Interest Rate Gap

The current US-Japan interest rate gap stands at 540 basis points in favor of the US, and such a gap will continue to offer support for the dollar.

The gap could shrink multiple times this year as the Federal Reserve  prepares to ease policies. 

Yen’s Outlook

East Spring Investments’ manager said that official Japanese intervention has stemmed dollar’s momentum against yen, however it could be temporary, with the pair holding ground around 155. 

UBS New York forex strategists said in an earlier memo that traders continue to favor the dollar over the yen for the time being.